Embraer sees resurgent market for E-Jets

 - November 30, 2010, 7:34 AM

Embraer expects to achieve a commercial aircraft book-to-bill ratio of a little more than one this year, reflecting solid demand from an airline market that continues to show definitive signs of a sustained, if not robust, recovery. During the company’s third-quarter earnings call in late October, company CEO Frederico Curado said Embraer would deliver at least 20 more commercial airplanes by year-end, after shipping 70 through the first nine months. Meanwhile, firm orders for 37 new E-Jets at July’s Farnborough airshow and a recently converted firm order for 15 E190s from Steven Udvar Hazy’s Air Lease Corp. helped raise the value of the company’s order backlog for the first time in two years, to $15.3 billion.

“Our initial forecast was to deliver 90 [commercial] jets; we’re probably going to surpass that by maybe a handful–five or more jets,” said Curado. “That will help us get to the $5.25 billion [in projected] revenue [this year]. So basically the increasing revenues will come from the airline market.”

Curado said that while the market for regional jets in the U.S. remains weak, the company has felt the effects of recovery “even in Europe,” with the conversion of options by British Airways, for example. Meanwhile, Embraer last month collected a firm order for six E190s from Indianapolis-based Republic Airways. It expects to close a deal with Republic for another 18 airplanes by April 15.

Elsewhere in the world, Curado noted sales activity in Brazil and across Latin America, the Middle East and Asia, including China, where the company plans to deliver its 100th aircraft soon. “Already today, we do have a book-to-bill ratio of one, maybe even more than one, and we do expect a few more sales before year-end,” said Curado. “Although we cannot be, let’s say, very bullish about it, [we see] signals of a sustained recovery. ”   

One might point to continuing strong sales of the company’s E-Jets as vindication of Embraer’s wait-and-see approach toward a decision on launching a new commercial aircraft program. In fact, while the Brazilian company continues to evaluate the market and the various engine replacement opportunities, it still shows no inclination to move before Boeing and Airbus decide on their own future single-aisle strategies.

“We should not make any premature decisions about that family,” said Curado. “Boeing and Airbus have not yet defined their next moves. I think the whole market expected Airbus to announce its re-engining by Farnborough, and then in October. It did not. Boeing has given no clear indication whether or not it will do it or when. So, for us…to try to preempt and do anything at this stage while having a solid product line just does not make sense.”